Biodiesels offer an interesting conundrum for ethical investors.
Photo:mwboeckmann, Creative Commons, Flickr
When it comes to ethical investing, the primary concern of The Panelist, it can be difficult to pick energy companies that have environmentally friendly practices. It's well-known that Exxon (XOM) and other Big Oil companies have been slow to change their practices and diversify sufficiently into sustainable energy. But for the ethical investor, choosing other energy companies in which to invest can be equally difficult, especially when it comes to biodiesels.
Biodiesels have been hailed as the future of the transportation energy, since they emit fewer greenhouse gases and provide a renewable and abundant source of energy, especially in terms of the internal combustion engines that most cars run on. But this is where it gets tricky: while biofuels themselves may emit fewer greenhouse gases than their Big Oil counterparts, some of the practices that lead to growing them can be environmentally devastating.
A good example of this is palm oil. Growing in popularity for biodiesel, palm oil was recently slammed because a good deal of it comes from plantations that are created through clear-cutting rainforests, undoing any good that lower emissions might have. And the debate over corn ethanol has been raging for months now. Companies like Biofuel Energy Corp. (BIOF) and Earth Biofuels (EBOF.OB) rely heavily on corn ethanol to fuel their products.
An interesting alternative, however, is Pure Biofuels Corp. (PBOF.OB). This company, based in South America, is focusing on jatropha and palm oil. The main question regarding Pure Biofuels is whether the company's palm oil for biodiesel comes from one of the small-scale sustainable palm oil operations in South America, or whether it will come from clear-cutting plantations that could spring up as palm oil becomes more popular.
All three of the above companies are gaining on the stock market as of this writing (and who isn't right now? Exxon, for one), and all three are very low-priced. If the future of biodiesel and other biofuels continues to look good, these companies may find themselves yielding even better value. Despite its dubious environmental benefit, corn ethanol is popular because large farming operations receive government subsidies, and it can be billed as a way for America to wean itself off of hostile oil producers (the security argument). But sustainable palm oil and jatropha may win more points, since palm oil yields more fuel per unit than does corn ethanol, and jatropha offers intriguing opportunities for environmental sustainability.
However you choose to go with one of the many biodiesel and/or biofuel companies springing up, if you are serious about environmentally friendly investing, you will look into the underlying opportunities and try to find a company that is both sustainable and likely to be around for ample returns on your investment.
Disclosure: I invest in none of the companies listed above. I am considering Pure Biofuels Corp. (PBOF.OB).